By Carole Gould N.Y. Times News Service In the first half of
this year, the stock market has had good news for nearly all
investors, with the average stock fund gaining 15.7 percent. The
small-stock rally picked up steam as the group rose 26.5 percent
through June 20, according to Lipper Analytical Services in Summit,
Among specialty funds, which invest in narrow market sectors,
the financial-services group led with a 31.9 percent gain, and the
health-and-biotechnology group, which rose 30 percent, was close
In third place were the real estate funds, which invest mainly
in companies that own, operate or develop real estate or that
supply services or goods to the real estate industry. These funds
gained 22.4 percent.
The turnaround comes after a dismal 1990, when the five funds
in the group dropped 16.9 percent, more than double the average
stock fund's loss of 7.3 percent, making real estate one of the
year's three worst performers.
A robust performance by real estate stocks is usually a portent
of better times because "it's one of the first sectors to pick up
when the recovery kicks in," said Stephen A. Schoepke, a Lipper
As an industry, real estate is very sensitive to shifts in
interest rates. When the Federal Reserve eases credit, shkrt-term
rates fall and long-term rates, including mortgage rates, follow.
People start buying houses, builders start building and the effects
ripple through the economy. In fact, some people estimate that as
much as 40 percent of the economy is tied to residential real
The real estate mutual funds are small _ totaling only $164
million in assets _ and all were established within the last five
years. High returns like those of the first half of this year have
been unusual. In fact, Barry Greenfield, who manages the $58
million Fidelity Real Estate Fund, says the current rally is a bit
of a fluke, the result not only of lower interest rates but also
the fact that last year the marketplace viewed the real estate
stocks as worse than they really were.
Other managers insist that there are still bargains among real
estate stocks. Even so, they advise patience.
"If you're going to play the real estate market, you have to be
a patient, long-term investor," said Mark G. Holowesko, who manages
the $33 million Templeton Global Real Estate Fund. Do not expect to
make money in the next 12 to 18 months, he cautioned; three or four
years is a more reasonable target.
The first half's best performer was the $7.5 million United
Services Real Estate Fund in San Antonio, which invests mainly in
REIT's (real estate investment trusts) and publicly traded home